If you’re a business owner here in Maine, the new year comes with new payroll rules. Here are five of the most significant changes for 2020:
1. Significant revisions have been made to Form W-4
The IRS has redesigned Form W-4 for this year to reflect changes from the Tax Cut and Jobs Act (TCJA) — which eliminated personal exemptions and increased the standard deduction. The mismatch between the old W-4 and the new tax law caused some taxpayers to be over or under withheld. You can get answers to some frequently asked questions about the new form on the IRS’ website.
2. Withholding was revised
The TCJA also created the need for revisions to federal withholding tax computations. You can get details about that change from IRS Publication 15-T. Some states have even issued guidance on how to compute withholding in regards to the federal changes.
3. New overtime rules were issued
The standard salary level test threshold for a bona fide executive, administrative, or professional (EAP) employee, who are exempt from receiving overtime is now $455 per week ($35,568 annually).
The salary threshold for a highly compensated employee (HCE) to be exempt from receiving overtime is now $107,432. The employee must be paid at least $684 per week on a salary or fee basis and perform certain duties.
Employers can now use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level.
4. Unemployment tax may have changed in some states
While Maine isn’t among the states that have increased the amount of taxable wages subject to unemployment tax, nearby states such as New York, Rhode Island and Vermont have. If you have employees or operations in those states, you should look into how this may impact your workers or business.
5. The minimum wage rate has changed in Maine
Maine, which has raised the minimum wage to $12 per hour, joins a long list of states that increased their minimum wage as of January 1, 2020 (nearby states such as Massachusetts, New York and Vermont being among them).
If you have questions about payroll, tax changes or need assistance with financial management of your business in Maine, contact us at Filler & Associates.